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CONTINGENCIES INFLUENCING
MANAGEMENT ACCOUNTING PRACTICE:
A YEMEN-bASED EMPIRICAL STUDY
Ahmed Abdullah Saad Al-Dhubaibi
Ibrahim Kamal Abdul rahman
Mohd Nizal Haniff
Zuraidah Mohd Sanusi
Accounting Research Institute & Faculty of Accountancy
Universiti Teknologi MARA, Malaysia
AbSTrACT
Introduction
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Contingencies Influencing Management Accounting Practice
This study explores the advancement level of MAPs in Yemen using the
IFAC framework. Several organisational and environmental factors are
also investigated to understand the variation of MAPs among companies
and to explain why some companies tend to adopt advanced MAP while
others do not.
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MAP studies in Middle Eastern countries are in line with those in other
developing countries. For instance, the large and medium-sized companies
in Saudi Arabia utilise traditional MAP more frequently than contemporary
MAP (El-Ebaishi, Karbhari & Naser, 2003). McLellan and Moustafa (2011)
investigated MAP in the Gulf Cooperative Council Countries (GCC), which
is composed of Saudi Arabia, United Arab Emirates, Qatar, Oman, Kuwait
and Bahrain, and found that most MAPs adopted in these countries were
traditional. Joshi et al. (2011) also explored MAP in GCC and found that
MAPs related to performance evaluation had a moderate adoption rate,
whereas strategic MATs had a low adoption rate. Abdel Al and McLellan
(2011) as well as Nassar, Al-Khadash, Al-Okdah and Sangster (2011)
investigated the situation of MAPs in Egypt and Jordan, respectively.
Their results were similar to the studies conducted in other Middle Eastern
countries. Egyptian and Jordanian manufacturing companies use traditional
MAPs more frequently than newly developed MAPs. Given the level of
MAP adoption in the Middle East, where Yemen is located, we hypothesise
the following:
H1: The majority of the firms in Yemen are in stages one and
two of MAP adoption according to the IFAC classification of MA
sophistication.
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Contingencies Influencing Management Accounting Practice
H2: Those firms that face a high degree of competition adopt advanced
MAPs more frequently than those firms that face a low degree of
competition.
Research Design
Questionnaires are used to collect empirical data for this study. These
questionnaires request the respondents to present facts rather than to express
personal opinions as in the case of interviews. Surveys are preferred as they
do not require prompt responses from the respondents and grant them a
higher degree of anonymity, which drive the respondents to be more realistic
in their responses (Gosselin, 1997). The questionnaires were initially
distributed to several respondents in Yemen, and a face-to-face discussion
was held to determine their understanding of each item. Another set of
questionnaires was distributed to several respondents to encourage feedback.
These procedures aim to ensure the comprehensibility of the questionnaire
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and the appropriateness of the translation from English to Arabic. After the
face-to-face discussions with the respondents and soliciting their comments
on the clarity of questions, the questionnaire items were then retranslated
to Arabic language as required. The measurements for these items were
adopted from previous studies to enhance the reliability and validity of the
questionnaire. Minor modifications some measurements were made to suit
the Yemen environment.
Aside from a random number of medium and small companies, the sample
included large companies operating in various economic sectors and could
be contacted via email or personally by the researcher to achieve a sufficient
sample size. Surveying companies from different industries facilitated
access to a large number of respondents and provided adequate data for
the statistical analysis.
Results
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Contingencies Influencing Management Accounting Practice
Industry Type
Manufacturing 36 22.8 22.8
Natural resources extraction 9 5.7 28.5
Financial/Banking 19 12.0 40.5
Tourism 2 1.3 41.8
Healthcare 6 3.8 45.6
Trade 39 24.7 70.3
Service 27 17.1 87.3
Construction 13 8.2 95.6
Other 7 4.4 100.0
Total 158 100.0
Nationality of Company
Local 136 86.1 86.1
Foreign 22 13.9 100.0
Total 158 100.0
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Table 2 presents the MAP stage of the sample firms in Yemen. As explained
earlier, the stages of MAP reflect the level of MAP advancement according
to the classification of the IFAC framework for management accounting
evolution. According to this framework, stages one and two indicate the
traditional MAP that was developed from the early 20th century to mid-80s,
whereas stages three and four represent advanced MAP that was developed
from the late 1980s onwards. Stage one is the oldest and most traditional
practice, whereas stage four is the most recently developed and advanced
practice.
When our findings are compared with those of other studies that were
conducted in developed countries, a gap between developed and developing
countries in terms of MAP could be observed. For example, (Abdel-Kader
and Luther, 2006b) explored MAP in the UK food industry and found that
19% of the surveyed firms were still at stage one, 41% were at stage two,
27% were at stage 3 and 13% were at stage four. However, their sample of
UK companies was only taken from the manufacturing industry, whereas
the sample of this study was taken from various economic sectors in Yemen.
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Contingencies Influencing Management Accounting Practice
Cumulative
Frequency Percent
Percent
MAP Stage
Table 3 summarises the t-test results for the equality of means analysisofH2
and H3, which propose the effects of competition (environmental factor)
and decentralisation (structure) levels on MAP. Levenes test for equality
of variance shows a probability greater than 0.05 for both competition
and structure, indicating that the population variances are relatively equal.
Therefore, the equal variance estimates are interpreted. H2 states that firms
facing a high degree of competition adopt advanced MAP more frequently
than firms facing a low degree of competition. Table 3 shows a significant
difference in the level of competition between firms implementing traditional
MAP and those implementing advanced MAP (t = 2.82, P<0.05). The mean
value of competition level as perceived by the responding firms in Yemen
indicates that firms that implement advanced MAP face a higher level of
competition (5.70), while those firms that implement traditional MAP
operate in markets with a lower level of competition (5.02).Therefore, H2
is supported.
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Table3 shows that the t-test results for independent groups exhibit a
significant difference in the level of delegation for decision making between
firms that implement traditional MAP and firms that implement advanced
MAP (t = 3.96, p< 0.05). Equality of variance is assumed as discussed
earlier. The mean delegation level of firms that implement advanced MAP
(4.63) is higher and significantly different than that of firms that implement
traditional MAP (3.71). H3 states that firms with a higher degree of decision
making delegation adopt more advanced MAPs than the one with a lower
degree of decision making delegation. Therefore, H3 is supported.
Structure
0.211 0.64 3.96 0.000
(Delegation)
Traditional MAP 3.71 1.40
Discussion
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Contingencies Influencing Management Accounting Practice
Firms that face a high level of competition in their respective markets acquire
more advanced MAP. A higher level of competition forces firms to become
alert, innovative and responsive to advanced methodologies in business
management. Competition increases the demand of firms for information
to support their decision making processes.
Conclusion
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The effects of two contingent factors on the level of MAP advancement were
examined in this study. These two factors can influence the sophistication
level of MAP and contribute to our understanding of how firms decide to
adopt or reject new MA tools. These two factors are environmental factors
outside the control of firms (i.e., competition) or organisational factors
related specifically to each firm (i.e., structure).
Future studies can further investigate the effects of factors related to the
characteristics of the top management and personnel of firms. These types
of factors can be managed and improved favourably according to empirical
results, which in turn can improve the level of MAP advancement in
developing countries.
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